Music Via Subscription Projected To Grow More Than 300% in Next Four Years

As consumers flock online to satisfy their yen for music, they'll be spending more money than ever at subscription services, according to a report released today by Gartner.

Subscription services now account for around eight percent of online music sales, but Gartner estimates that by 2015 they will generate nearly 29 percent of online revenues for music sales.

As more and more consumers around the world opt for connected devices such as smartphones, tablets and/or ultraportable notebooks as sources for their music usage, subscription services--where users can have access to large amounts of music without the need for large amounts of local storage, as well as easy sharing of music among devices--will become increasingly attractive.

In fact, according to Gartner, revenues from online subscription services are expected to jump from $532.1 million this year to $2.2 billion in 2015, a climb during the period of more than 300 percent.

Gartner says that more and more consumers will turn to subscription services, which will be the major growth sector for online music sales during the report's prediction horizon. Overall, online music revenues will grow almost seven percent from 2010 to 2011, Gartner reported, and will increase almost eight percent from 2011 to 2012 and 81 percent from 2011 to 2015.
Background

"The music industry was the first media sector to feel the full impact of two major forces—the Internet and technology-empowered consumers," the author of the report, Research Vice President Mike McGuire, said in a statement.

"It has staggered through the first decade of the 21st century, and entered the second bedraggled financially and facing a powerful set of intermediaries, which are creating borderless global ecosystems that defy the industry's previous notions of control and monetization," he continued.

"The primary stakeholders in the music industry are facing wrenching changes and a somewhat uncertain future," he added. "However, the next four to five years portend solid growth."
CD and LP Sales Expected to Decline

While consumers choose to fill their mobile devices with music from the Internet, sales of CDs and LPs will drop, Gartner said, from $15 billion in 2010 to $10 billion in 2015, a decline of 33 percent.

In order to survive in the changing music environment, the report advised, stakeholders must come to terms with how they treat data they gather about their consumers. The issue will likely remain a point of contention among labels and artists and the online music services, the report noted, but stakeholders will need to agree to broadly beneficial standards, such as extensions of OpenID, to minimize the number of times a consumer has to cough up an ID and password for multiple social media tools.

"For music labels, artists and publishers, challenges abound," McGuire observed. "However, there remain real opportunities to reinvent the business based on consumers who are adopting connected devices and who are showing they will pay for content in multiple ways."

"These sorts of changes," he continued, "offer the potential for many new types of service and business models aimed at allowing music fans to manage and access their music libraries while also integrating social media and content payment options."

The report also noted that in areas where online music sales are mature--North America, Western Europe and Asia--revenue growth will be relatively flat. High growth will be in areas that have been resistant to paying for their online music--Latin America, Africa and the Middle East.